Analysts at Cordros Research say the CBN’s ban on forex sale to BDC operators will further pressure the exchange rate in the parallel market.
The analysts said this in a post on the Monetary Policy Committee (MPC) report.
They said the discontinuation of the sale of foreign exchange to the BDCs would put further pressure on the exchange rate as the commercial banks settle to adjust to the Central Bank of Nigeria’s directive.
The analysts added that knee-jerk reaction from market participants induced by the urge to stockpile the dollar to mitigate an expected exchange rate pressure was another factor.
“Overall, we believe the effectiveness of the modalities in disbursing the greenback to the retail segment through the commercial banks would determine how much the current rates at the parallel market will diverge from the NAFEX rates,” they said.
The CBN governor, Godwin Emefiele, noted that the BDC operators had abandoned the objectives of their establishment, which is to serve the retail end-users who needed $5,000 or less.
Mr Emefiele explained that they had become wholesale dealers and illegally transacted forex in millions of dollars per transaction.
Given the rent-seeking behaviour of the BDCs, the MPC decided with immediate effect to discontinue the sale of forex to the BDCs with the CBN halting the issuance of new licenses for BDC operations in the country.
The members voted to channel a significant portion of weekly allocations of BDC to the commercial banks to meet legitimate forex demands.
They instructed commercial banks to create a dedicated teller point in designated branches to sell forex.
On rates retention, the analysts said the status quo was in line with market expectations.
“The outcome reinforces our view that the committee is trying to balance supporting economic recovery and attaining price/exchange rate stability,” they noted. “We expect that the MPC will lean toward an accommodative monetary stance until it is satisfied that substantial progress has been made in reviving the real sectors from the pandemic-induced slump in 2020.”